UPDATE 1-Euro zone economic morale jumps, easing pressure on ECB to act

Thu Jan 9, 2014 6:46am EST

* Economic sentiment up by 1.6 points in December
    * Hits long-term avg first time since July 2011
    * Spain and Italy show strong improvement


    By Martin Santa
    BRUSSELS, Jan 9 (Reuters) - Euro zone economic sentiment
rose more than expected in December and inflation expectations
picked up, data showed on Thursday, easing some pressure on the
European Central Bank to loosen monetary strings further.
    Sentiment in the euro zone's southern, peripheral economies
improved more than in core Germany and France.
    Economic sentiment in the 17 countries sharing the euro in
the month strengthened by 1.6 points to 100.0 in the eight
straight month of gains, beating economists' expectations, data
from the European Commission showed on Thursday.
    Economists polled by Reuters had expected an improvement
only to 99.1 points. The more optimistic numbers come as the ECB
meets on interest rates, concerned that low consumer inflation
risks being stuck in what the bank considers a 'danger zone' for
tipping into deflation.
    "Improving economic news on the euro zone dilutes some of
the pressure on the ECB to take immediate further stimulative
(steps)," said Howard Archer, economist at IHS Global Insight.
    "Although well below target euro zone consumer price
inflation and still markedly falling bank lending to businesses
suggest that the ECB will eventually need to act," he said.
    ECB policy-makers have stressed there was no risk of
deflation in the euro zone and the monthly Commission survey
showed that consumer expectations of price trends over the next
12 months rose to 14.6 in December after dipping to 14.0 in
November from 16.7 he previous month.
    Also among manufacturers, selling price expectations
continued to rise steadily to 2.4 in December from 1.5 in
November and 1.1 in October.
    
    RECOVERY GAINS TRACTION
    Of the bloc's five largest economies, economic morale in
Spain jumped 4.0 points, 2.3 points in Italy and sentiment in
the Netherlands was up by 1.5 points in December.
    The euro zone's largest economy Germany and the second
biggest France saw sentiment improving by 0.3 points in the last
month of the last year.
    Despite persistently high unemployment, stuck at a record of
12.1 percent of the workforce, optimism among euro zone
consumers continued to grow, rising 1.8 points in December.
    Analysts said the improving sentiment suggested the recovery
gained traction in the last quarter of the last year.
    "Although the experience of past months shows that sentiment
indicators are currently not a good indicator for the real
economy, we see this data as evidence of a slow recovery of the
euro-zone economy," said Christoph Weil, economist at
Commerzbank.
    The Commission survey showed the manufacturing, retail and
construction sectors all planned to hire more workers and
consumers expect the number of people without jobs to fall.
    A separate data release showed the business climate
indicator, which shows the stage in the economic business cycle,
edged lower to 0.27 in December from an upwardly revised 0.31 in
November, but it still beat market expectations of 0.22.